Friday, November 27, 2009

Ethanol Woes

The NYTimes reports about the projected excess of ethanol mandated by Congress. Two years ago Congress mandated more use of ethanol for obvious political reasons:
To please the farm lobby and to help wean the nation off oil, Congress mandated that refiners blend a rising volume of ethanol and other biofuels into gasoline. They are supposed to use at least 15 billion gallons of biofuels by 2012, up from less than seven billion gallons in 2007.
But the recession and reductions in fuel consumption make these targets hard to fulfill:
At the maximum allowable blend, in which gasoline at the pump contains 10 percent ethanol, updated projections suggest that the country is unlikely to be able to use all the ethanol that Congress has ordered up. So something has to give.

When Congress wrote the rules, in 2007, gasoline consumption had been growing for years, and it looked as if the nation would be able to use considerably more ethanol in the future. Gasoline consumption hit a peak of 3.4 billion barrels that year.

But gasoline demand fell in 2008, after soaring gas prices early in the year were followed by the economic crisis. Consumption was slightly less than 3.3 billion barrels last year, and it could end 2009 at about the same level.

Congress could lower the targets but this would anger farmers. It could raise the amount of ethanol blended in gasoline, but this would ruin catalytic converters.

Perhaps the best solution would be for Congress to just buy the excess ethanol and store it. Cars would be saved and the subsidies would be maintained. But this would make transparent the fact that ethanol is a political subsidy to farmers, not a beneficial program to deal with global warming or energy needs. And making this transparent would make the subsidy program less sustainable over time. So this is unlikely. So more of our cars are likely to be rendered clunkers, but the cash will only be for the farmers this time.

Makes you kind of wonder what Congressional created health care will be like.

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